The first part of 2011, according to a large national financial newspaper, saw an increase in commercial mortgage lending, which has given many markets new hope that the banks are beginning to loosen up their previously tight lending criteria.

Recent date from the Bank of England shows that the situation may finally be improving. Bank lending increased in January 2011, reports the Financial Times, with more commercial mortgages and business loans being made available. Business leaders are encouraged by these figures which show that banks may finally be loosening their purse strings again.

The FT reported that over the three months to the end of January, business lending grew at an annualised rate of 2.6 per cent. This means that loans to private companies increased by over one billion pounds in January.

The subject of commercial lending has become somewhat delicate since the market crash, and small businesses have felt to be left out in the cold. But new Government intervention should see commercial lending continue to rise: Project Merlin has now been launched to increase loans for smaller businesses.

In return for the banks being allowed to keep their bonus payments, the government have insisted they now lend to industry. Last year the banks lent £179 billion in loans to business, and in the next year that it expected to rise to £190 billion, with £76 Billion offered to small businesses.

As part of Project Merlin, bank chief executives will be measured on their business lending when it comes to determine their own bonuses.

Despite these Government approved commitments, many business experts remain to be convinced that lending will improve. “The vast majority of businesses are not going to the banks and seeking finance at the moment” said Andrew Cave from the Federation of Small Businesses. He added: “And those that do are telling us that the cost of borrowing – both existing and new borrowing – is increasing and those issues are not going to go away with this announcement.”

Unless small businesses are able to borrow loans and commercial mortgages, it makes it very difficult for them to grow. Without a commercial loan, firms cannot invest in new stock, technology or equipment. The knock-on effect of this is that they are unable to create new job opportunities for the unemployed.

“While the big banks’ renewed commitment to small business lending is welcome, ministers and the banks need to focus their energy on improving frontline services for small and medium-sized firms.” So says David Frost of the British Chambers of Commerce (BCC) who agrees that many companies are not even asking for commercial mortgages at the moment. “Without clear lending processes and more sensible decision-making at a local level, many businesses will still be reluctant to ask for loans and big net lending targets won’t be met.”

It is now expected with the introduction of certain Government measures that the market will begin to pick up again in the near future – some great news for an economy that has been in a state of despair for the best part of 4 years now.

Howard writes for Just Commercial Mortgages.com the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.